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  Rivals Ambivalent as Ruling Nears

By David Streitfeld
Washington Post Staff Writer
Friday, October 29 1999; Page A01

Jean-Louis Gassee calls himself an optimist. Others, he acknowledges, might use the term "foolish." If you challenge the world's most successful and most aggressive corporation in its core market, people are going to wonder about your mental stability.

In 1990, Gassee founded Be Inc., which makes a specialized operating system for personal computers. Be's system has won excellent reviews but has, at most, one-tenth of 1 percent of the market. Microsoft Corp.'s ubiquitous Windows has about 90 percent.

"I'm keenly aware every day of the fact that I'm competing with such a competent, paranoid, ruthless company," Gassee said. "But justice will prevail."

Gassee won't have to wait much longer to find out whether he's right. U.S. District Judge Thomas Penfield Jackson in Washington is about to issue preliminary findings in the antitrust case filed against Microsoft by the Department of Justice. Jackson's "proposed findings of fact" are to be released on the Internet after the financial markets close on a Friday. If not today, it will probably be next week.

Whenever the moment comes, many Web browsers in Silicon Valley, including Gassee's, will be pointed toward Washington, where the document will be posted on a site created for the occasion (http://usvms.gpo.gov). The findings will offer a clue as to whether Microsoft could be punished for its business practices, depending on whose argument the judge sees as more compelling: the government's assertion that Microsoft is an illegal monopoly, or the company's defense that these charges are trumped-up nonsense.

The more the judge seems to be coming down against Microsoft, the more the high-tech landscape will shift. Competitors will be emboldened. More lawsuits by those who feel victimized by Microsoft are probable. The antitrust case, as well as other suits pending against the company, are already a drag on the company's earnings; the high-tech world is watching to see if they'll inhibit its killer instinct as well.

Which is not to say that everyone here is cheering the government on.

"As much as the Valley would love to see Microsoft given its comeuppance, it's profoundly ambivalent about Washington being involved," said Paul Saffo of the Institute for the Future, a Menlo Park think tank. "If Washington can't figure out how to handle a presidential affair, I guarantee you they're not going to be able to handle technology."

Microsoft and Washington have one thing in common, says Saffo, the valley's unofficial historian. "They're both institutions that are fearful of change," he said. "Most of Congress has a soulmate in Bill Gates. They're doing everything they can to preserve themselves, and the rest of us be damned."

If the Valley's concern about Washington is new, it has a long history of antipathy toward Microsoft. The cradle of high tech has traditionally felt that the giant up in Redmond, Wash., is a second-rate outfit that flourishes by plundering other, better firms.

Scott Cook, founder of the financial-software firm Intuit, named it "Godzilla." Jim Clark, co-founder of the browser company Netscape, was more blunt: "Fundamentally an evil company." Clark's Netscape colleague Marc Andreessen once noted that people in the industry generally thought of Microsoft as the Mafia: "You don't say no to the Mafia, you don't challenge the Mafia, you generally don't [mess] with the Mafia."

Gassee, who was born in France, worked at Hewlett-Packard and then Apple, and is now in the process of becoming an American citizen, didn't think he was crossing Microsoft.

"I'm crazy, but I'm not that crazy," he said. Be's system, which offers sophisticated audio and graphic capabilities, is geared toward designers and musicians. "I saw it as peacefully coexisting with Windows. But clearly Microsoft doesn't feel that way."

Indeed, Microsoft executive Paul Maritz testified during the trial that the tiny Be, whose total revenue for the first nine months of the year was $1.6 million, was a genuine competitor. Its mere existence was proof that Windows did not have an illegal stranglehold on the operating-system market.

"I admired their cheek," Gassee said. "The Jesuits have this concept of holy effrontery--in defending their cause it's okay to use any means, including false statements. I'm not sure Microsoft's effrontery is that holy. It's certainly very shameless. But you've got to admire it at some level."

In recent reviews, Be has been praised by PC World Online ("Fast and stable, and oh-so-easy to use") and Performance Computing ("The right mix of fast, cheap, easy, and reliable"). So why does Windows run on about 100 million computers, and Be on fewer than 100,000?

Gassee says the problem is rooted in the computer factories, where Windows is installed directly onto the machines. "The computer company does not control its own computer," he said. "Microsoft treats the companies like vassal states. It's a simple mechanism--the computer maker pays, say, $40 for Windows. But if they 'misbehave,' it turns out they no longer qualify for certain discounts. So the price goes up."

Microsoft doesn't want competition, Gassee said, because it "understands what all tyrants understand: The crack in the wall is the beginning of the end."

This is basically what the government contended--and Microsoft denied--during the course of the trial. Computer makers, government attorneys wrote in one summarizing brief, "recognize that they are dependent on Microsoft and fear that Microsoft will use its monopoly power to harm them if they favor Microsoft's rivals."

Other, more neutral, parties agree that Gassee's claim shouldn't be dismissed as the whining of an executive unable to compete. "The concept of Microsoft muscling computer manufacturers is not pie in the sky," said Sebastian Rupley, West Coast editor of PC Magazine. "It's been accused of this and chastised for it before. There's a trail here. But until Be shows proof, it's name-calling."

Gassee has not, at least so far, taken the expensive and time-consuming option of suing Microsoft, nor has it even directly confronted the company: "It's useless." Nor is he pinning any hopes on Judge Jackson. "The fact that at some point Microsoft could be forced to operate under new rules is momentous. But we have to rely on our wits, not on judges or the Department of Justice," he said.

In fact, Gassee's views of Microsoft are curiously ambivalent. "The way they screwed Netscape"--which made the Internet accessible to the masses by coming up with the first popular browser--"was absolutely admirable. They said the Internet was nothing, and then did a 180-degree turn and caught up. That is the way to run a business. But this is also company that has questionable morals."

At other companies, the admiration for Microsoft is more straightforward. "It's very easy in the Valley to get caught up in some of the [anti-Microsoft] emotion," said Larry Cohen, the senior Microsoft executive here. "But when you get beyond that, we're finding that more of these companies are interested in working with us." It does, after all, have $19 billion in cash, waiting for the right investments.

And then there's a third group of entrepreneurs, who try to separate their personal feelings from their professional attitudes.

Meet Jeff Bonforte, private citizen. Microsoft "should be broken up," he said. "It's bad for technology." He grew up worshiping the consumer-friendly Apple Computer, which struggled against the rise of Microsoft and lost. "I would have done anything to hurt Microsoft."

Now meet Jeff Bonforte, chief executive of the new Internet company I-drive.com. "Someday," he said, "I look forward to partnering with Microsoft."

I-drive is a system for allowing users to store data on the Web instead of their computer's hard drive. To the extent it catches on, there will be less of a market for Windows and its accessories. And if it really catches on, Microsoft will offer its own version--backed by that $19 billion war chest. Much better, then, to have it as a partner.

In the meantime, Bonforte doesn't need to think about it. Big companies are in a marathon; they constantly have to look over their shoulders to see who's gaining. But small companies are sprinting. Looking around slows you down.

"I have very little time to even study my direct competitors," Bonforte said. "For a company like ours"--I-drive.com was formed in January and has 50 employees--"six months is a lifetime. Anything more than a quarter out, I don't think about."

By the time the legal case against Microsoft makes its way through the inevitable appeals and the company is or is not restrained, "I'll either have 5 million users or not," Bonforte said. "I'll either be relevant or not."

I-drive is just one of thousands of new companies seeking to undermine the computer-on-every-desk, Windows-in-every-computer hegemony. In this future, you'll order books from Amazon from your handheld Palm computer, not your desktop Compaq Presario.

"Microsoft is not quite as effective as extinguishing competition as it has been in the past," said Saffo of the Institute for the Future. "It's like playing Whack-a-Mole. There are too many holes where something is coming out for Microsoft to be able to whack them all."

This, of course, is what the company's executives have always feared; one reason Microsoft is such a fierce competitor is that it always sees the prospect of failure looming. In the ongoing shift to a new world of wireless devices, Microsoft is determined not to be left behind.

For Gassee, that's the real importance of the Justice Department suit.

"They're trying to use their hold on the personal computer industry as a point of leverage to create a monopolistic hold on this new world," he said. "It's important to prevent Microsoft from gaining another stifling monopoly. This is about the future, not the past."

© 1999 The Washington Post Company

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